Asset managers invest money on behalf of their clients – including pension funds, institutional investors, retail investors, insurance companies and others – with a view to making it grow over the long term.

‘Active’ asset managers use their skill to build portfolios that can beat the market average and often take bigger risks for better rewards.

By comparison, ‘passive’ management, or index tracking, involves selecting a portfolio of assets whose change in value will match that in a financial index – such as the UK’s FTSE 100, Eurostoxx 50 in the eurozone, the Dow Jones Industrial Average in the US and the Hang Seng Index in Hong Kong. Simply creating returns that match the market is known as ‘generating beta’.

However, within these two categories, the array of fund management styles is huge. For example, two contrasting styles are ‘bottom up’ investing – where a fund manager focuses on analysing individual stocks or securities – and ‘top down’ investing, which relies on analysis of ‘big picture’ trends in the economy, financial sector or individual industries. Some fund managers also focus on investing in fixed income products, while others prefer equities, and portfolio managers often have a particular country expertise, whether that’s the U.K., U.S. or emerging markets.

Jobs and career paths in asset management

Investment roles — Investing the money managed by the asset management firm. Graduates start out in investment roles usually as analysts, who scrutinise the best companies and products in which to invest, looking at financial and legal information to assess their growth prospects. The money is actually invested by portfolio managers (otherwise known as fund managers), who are responsible for managing money, often across a range of funds, in their area of expertise, be it equities, fixed income or alternatives. Portfolio managers can also have sector specialism – say, oil and gas or property – and can focus on particular countries, or groups of locations, such as emerging markets.

Distribution roles — These jobs cover sales, marketing, product development and client servicing, and are about selling a fund manager’s services to the clients who invest their money with it.

As in investment banking, there’s a range of middle-office jobs in fund management in areas such as compliance, technology, operations, performance measurement and risk management. The higher-paying roles are in investment and distribution, however.

Skills needed to work in asset management

If investment banks advise clients on trading or funding decisions, fund management is more about making decisions on their behalf once they have entrusted you with their money.

Don’t expect an easy ride as a fund manager – you’ll need to be an expert at filtering large quantities of data, and to be passionate about investing. You’ll also be heavily judged on your performance: one fund manager told us it’s like “being a student taking a test every single day and getting a grade, and that grade is published every single day in the newspaper.”

“I spend a lot of time in various types of strategy and problem solving, so I think the ability to boil things down to the critical facts is important to begin to find the right path forward,” said Barry Smith, chief operating officer of State Street Global Advisors’ Institutional Client Group and global head of cash. “Decision-making in management isn’t often about choosing between the right or wrong path – it’s usually trying to choose between two equally challenging options.”

While being quantitative is undoubtedly important to work in fund management, qualitative analysis skills are also important. If, say, a negative news story caused a sudden drop in a stock in your portfolio, you’d have to try get to the bottom of how big an issue there really was.

“You must think critically and apply higher level thinking when creating investment strategies and constructing portfolios. It is also important to understand market psychology,” said Christopher Alwine, head of municipal bond group at Vanguard in the U.S. “You need the ability to accurately assess fundamental value to identify investment value and the associated risk/reward ratio of the trade. You also need drive because investment management is highly competitive. We are competing against the market every day and outperformance is not easy.”

While the large investment banks hire hundreds of graduates each year, even the big players in the fund management world recruit tens annually. As competition has intensified in recent years, the reality is that fund managers are now expecting their graduate recruits to be more prepared for the job market than ever.

“We look for self-starters who are passionately curious about financial markets, are able to influence others effectively, and can demonstrate sound judgment,” said Arvind Sabharwal, director of equities investments, M&G Investments in London. “We value graduates who have the confidence and ability to make and stand by a decision.”

This is reflected in the high level of responsibility given to junior fund managers – all firms will run their own in-house training schemes, but an understanding of financial markets before starting the role is a distinct advantage.